Tax Bites – March 2025

Welcome to the latest edition of RPC's Tax Bites – providing monthly bite-sized updates from the tax world.

News

HMRC outlines its approach to taxpayers affected by the independent Loan Charge review

HMRC has published a briefing which explains the approach it will take with taxpayers affected by the  independent review of the Loan Charge.

The review, announced in the Autumn Budget 2024, will examine the Loan Charge's impact on users of disguised remuneration tax avoidance schemes. During the review, HMRC will continue to address open enquiries and settlements related to such schemes. Affected individuals will receive letters providing a dedicated HMRC contact and clarification on whether their arrangements fall within the review's scope.

HMRC publishes supplementary draft guidance on Multinational and Domestic Top-up Taxes

HMRC has published supplementary draft guidance on the Pillar Two Multinational Top-up Tax and Domestic Top-up Tax.

The draft guidance contains sections on the Undertaxed Profits Rule, joint venture groups, flow-through entities, and insurance sector considerations. It also covers additional top-up amounts and post-filing adjustments.

HMRC has opened a consultation inviting comments from stakeholders on the draft guidance by 8 April 2026.

HMRC confirms changes to size thresholds for off-payroll working

HMRC has confirmed to the ICAEW that changes to company size thresholds in the Companies Act 2006, effective from 6 April 2025, will also apply for the purposes of the off-payroll working rules.

The change will mean that a company that does not belong to a group will be considered small, and therefore outside the scope of the rules, if two of the three following conditions are met:

• its turnover is no more than £15 million (increased from £10.2 million);
• its balance sheet totals no more than £7.5 million (increased from £5.1 million);
• its monthly average number of employees is not more than 50 (unchanged).

However, for the purposes of the off-payroll working rules, a company’s size is determined by reference to its previous financial year end and for the duration of a tax year. Therefore, the company size threshold changes will have no practical impact for off- payroll working until 6 April 2026, at the earliest. 

HMRC updates its Guidance on declaring income from online platforms

HMRC has updated its Guidance for individuals earning income through online platforms, such as selling goods or services, creating online content, or renting property.

The Guidance clarifies that while casual sales of personal possessions are typically tax-free, selling items for over £6,000 may incur Capital Gains Tax. Those regularly trading goods or services must report income exceeding the £1,000 trading allowance.

Case reports

Tribunal allows taxpayers' appeals as they were carrying on a business with a view to profit

In GCH Corporation Ltd and others v HMRC [2024] UKFTT 922 (TC), the First-tier Tribunal (FTT) allowed the taxpayers' appeals as GCH Active LLP was "carrying on a trade or business with a view to profit" at the time loan notes were transferred to it and the requirements of section 59A, Taxation of Chargeable Gains Act 1992 (TCGA), were therefore satisfied. The transfers were therefore capital contributions, rather than disposals, and no chargeable gain arose.

This decision provides some reassurance and clarity to LLPs that actively manage share investments, that they are likely to be carrying on a 'business'. The FTT's analysis of the meaning of 'business', which the FTT confirmed does not exclude investment business in the context of section 59A(1), TCGA, may have broader implications for other taxpayers engaged in managing share investments. 

You can read our commentary on this decision here.

R&D claim upheld by Tribunal

In Collins Construction Ltd v HMRC [2024] TC09332, the FTT upheld the company's claim for R&D relief, rejecting HMRC's claims that the expenditure was "subsidised" or tied to "contracted out" activities.

The two issues considered by the FTT in this decision are often raised by HMRC in R&D enquiries and it regularly adopts the positions which it unsuccessfully adopted in this case. The rejection of its arguments in this case by the FTT should cause HMRC to reconsider its approach on both the "subsidised expenditure" and "contracted out" issues. However, given the position HMRC has adopted to date, it may well seek to appeal this decision to the Upper Tribunal.

You can read our commentary on this decision here.

Supreme Court rejects taxpayers' appeals and denies enterprise zone allowances

In R (ota of Cobalt Data Centre 2 LLP and another) v HMRC [2024] UKSC 40, the Supreme Court (SC) dismissed the taxpayers' appeals concerning capital allowances on enterprise zone expenditure and confirmed the correct interpretation of section 298, Capital Allowances Act 2001.

This case concerned the eligibility of capital allowances under the Enterprise Zone Allowances (EZA) regime. The key issue was whether expenditure incurred more than ten years after the enterprise zone designation, but under a pre-existing contract, qualified for EZA relief. Although the same point is unlikely to arise in other cases, this is an important decision as the SC has confirmed the importance of a purposive construction to tax legislation. Although EZAs are now an historic allowance, the decision may still be relevant for other taxpayers in relation to similar reliefs.  

You can read our commentary on this decision here.

And finally...

In celebration of International Women's Day 2025, Women in Tax, the Women of IFA Network, the Chartered Institute of Taxation, ADIT and the Association of Taxation Technicians, are jointly holding a breakfast event at RPC's London office, centring on this year's campaign theme "Accelerate Action".

If you would like to attend, you can sign-up here.